We’re all in business to make money. And there is nothing more fun than counting the money you’ve made at the end of the day. But it is never really that simple, is it? Accounting is more than just zeros and ones. There are many ways to account for things like inventory, customer deposits, retention, and the list goes on.
iPoint was built on Best Practices in the audio-video industry. But different companies have different best practices when it comes to accounting. So, we’ve done our best to give you options on how to setup iPoint’s accounting.
Invoicing
You have four options on how to invoice your customers in iPoint:
- RFP-Liability
- RFP-Accounts Receivable
- Line Item
- Summary Invoicing
Note: If you are using Cash Basis Accounting you should use the Line Item/Summary billing method. 
Let’s take a look at each accounting option.
Request for Payment (RFP)
The RFP billing process is a two-step method.
- Requests for payment are sent to the customer based on percentages of the job. These invoices can be generated as work is completed or based on contractual dates.
- Delivery invoices are created internally, which capture all the inventory transactions as they occur. Typically generated weekly or monthly, delivery invoices reflect the actual goods delivered and services performed in the period they occurred.
Using the RFP method, customers are paying deposits which are held by the company and applied against delivery invoices as they occur. The customer does not see line item detail on their invoice. Instead, they would refer to the proposal to get line item details about their purchase.
As delivery invoices are created, iPoint applies the customer’s deposit against the actual goods and services sold, reducing the deposit. If the customer’s deposit has been fully utilized, the delivery invoice simply remains outstanding until the next RFP has been paid and payments applied.
At the end of the job, the value of your RFP invoices will typically match the value of your Delivery Invoices typically will match dollar amounts because you are tracking sold or quoted labor.
But you can also use the RFP / Delivery Invoice process to track actual labor by “delivering” more or less labor than was quoted on the Sales Order. This is an advanced process that we are more than happy to help you with if you are interested.
There are two flavors of RFP invoicing available.
RFP – Liability
The iPoint preferred method is RFP – Liability. In this method, a customer’s deposit from the Request for Payment is credited to a liability account on the balance sheet. As delivery invoices are created, the liability account is debited.
Here are the journal entries for the RFP – Liability method:
Request for Payment is an invoice in QuickBooks
Debit: Accounts Receivable
Credit: Liability Account
Customer Payment
Debit: Cash
Credit: Accounts Receivable
Delivery Invoice is also an invoice in QuickBooks
Debit: Accounts Receivable
Credit: Sales
Credit: Inventory
Credit: Sales Tax
Debit: Cost of Goods Sold
Credit Labor
Application of Payment
Debit: Liability
Credit: Accounts Receivable.
Note: When the payment is applied to the RFP invoice in iPoint, the RFP invoice in QuickBooks is reduced to a $0 invoice. The invoice is modified to have the original line item with the addition of an offsetting credit line that makes the RFP a $0 invoice.
RFP – Accounts Receivable
Another method is RFP – A/R. This option places the customer’s deposit in their account as a negative accounts receivable entry. This method makes it easy to see customer balances in QuickBooks but misstates the actual A/R balances due. RFP invoices are pushed to QuickBooks as Estimates – meaning there are no impacts to the Financials until payment is applied.
Here are the journal entries for the RFP – A/R method:
Request for Payment is an estimate in Quickbooks
There are no journal entries made.
Payment
Debit: Cash
Credit: Accounts Receivable
- This leaves a negative amount on the customer’s account in QuickBooks
- Effectively this creates a negative accounts receivable.
Delivery Invoice is an invoice in QuickBooks
Debit: Accounts Receivable
Credit: Sales
Credit Inventory
Credit Sales Tax
Debit: Cost of Good Sold
Credit: Labor
Application of Payment
The two A/R transactions clear each other out.
Line Item
A line-item invoice details every part that is sold and every service performed for a customer. And since each item in iPoint has general ledger accounts associated with them, financial details can be tracked very granularly on the GL in QuickBooks. This method also can provide line item pricing to your customer.
Customers pay for actual goods and services when they are invoiced.
This method tracks inventory nicely because every inventory item that is pushed to QB on an invoice decreases the inventory asset value on the balance sheet. Non-inventory items are tracked as expenses and are not tracked in an asset account.
The primary downfall to the line item method of accounting is that financial statement adjustments happen when the invoice is created, and not necessarily when the work took place. For larger jobs spanning multiple accounting periods, this method does not track when inventory adjustments, revenue, and tax liability occurred. Most tax jurisdictions require that sales tax be paid in the period that goods and services are delivered to the customer.
For larger jobs, the line item method can be manually time intensive if you are having to go through each invoice and decide what items are to be invoiced each period..
Additionally, the Line Item invoices can’t have nice round numbers to invoice (like 40% or $1,500) since we are invoicing actual items and the likelihood of those totals equalling a round number is next to none.
Summary Invoicing
This invoice method, sometimes called Progressive Invoicing, focuses on the percentage of work completed rather than on the goods and services actually being delivered. Many companies require a 10% deposit from their customer before they will start working or ordering equipment. As the job progresses, additional invoices will be generated for specific percentages of job completion. Summary invoices are pushed to QuickBooks accounting with a single revenue general ledger entry reflecting the percentage of the job being billed.
Customers pay specific percentages for the job based on the date invoiced.
This method, however, does a poor job of tracking costs and inventory since the cost accounts are tied to items and no items are included on the invoice pushed to QuickBooks. The process of pushing inventory adjustments and recognizing costs takes place with a manual inventory push process. When run, iPoint compares inventory levels with QuickBooks inventory levels and makes adjustments to keep everything in sync. This process is time-consuming and has the potential for errors due to timing variances in the staging and delivery of products.
As a result, if you choose to use Summary invoicing, iPoint recommends the best practice of pushing all items to QuickBooks as non-inventory. You can still track inventory in iPoint, you just don’t have to worry about the inventory sync to QB. This setting is available in Settings > QuickBooks > Items (tab) > 
Push all Items as Non-Inventory.
Additional Options
While the majority of iPoint Community Members utilize one of the four accounting options outlined above, there are some additional options available that might be meaningful to you and your company.
- Retention: Retainage is a system in iPoint to allow the tracking of a retainer amount that is held as a percent of each invoice, by the customer, and then credited to the final invoice at the close of the job.
- Click here to learn how to setup iPoint to use retention.
- Click here to learn about using retention on sales orders.
- Use Tax: Use tax is a tax that applies to contractors and contractor – retailers. Instead of charging sales tax to the customer, you must pay the sales tax based on your cost of the materials that are considered “Real Property” meaning they are a permanent fixture of new construction or remodel ( As defined by each state.) Click here to setup iPoint to track this strange tax law for you.
- AIA: The American Institute of Architects has developed a standard billing method referred to as AIA billing. Typically utilized in commercial construction, this method tracks payments through Applications for Payment which track the work completed or scheduled to be completed in a given time period. Click here to learn how to set up AIA billing for your company.
Here are a couple more obscure options:
- Line Item RFP Invoicing: This makes it possible for you to present an RFP invoice to your customer but show all of the line items. The invoice will still push to QuickBooks as an estimate.
- Line Item Percentage Invoicing: This allows you to invoice a SO for a specific percentage and each item will be partially delivered to match that percent. A 40% invoice, for example, would deliver 40% of the television, 40% of the control system, or whatever else you’ve chosen to invoice. This is the same method QuickBooks uses to invoice percent of estimates out. This adds a new wrinkle to inventory tracking as your QuickBooks is going to show 40% of every item delivered when maybe 5 out of 20 items are delivered. QuickBooks inventory is always going to be wrong until you do the stock adjustment.
Cash Basis Accounting
If your business uses Cash Basis Accounting, the RFP billing methods have some issues you must be aware of.
- RFP-AR will not work for Cash Basis Accounting, because deposits are recorded on Estimates, which are not included in QuickBooks tax liability calculation.
- RFP-Liability can present erroneous tax calculations in QuickBooks if the value of the delivery invoices is greater than the value of the deposits received. Both requests for payments and delivery invoices are pushed to QB as invoices and therefore would be included in the tax calculation. However, delivery invoices are pushed as a $0 invoice IF there are enough deposits to cover the invoice in full. If there are not sufficient deposits to cover the delivery invoice then the resulting QB invoice shows a balance due which looks like an eligible invoice for sales tax calculation to the QB formula.
Note: iPoint does not recommend using either of the RFP billing methods for companies that use Cash Basis Accounting.